UK: VAT Focus - January 2014

Last Updated: 14 February 2014
Article by Smith & Williamson

Participation in sport provided by not-for-profit clubs

The European Court of Justice (CJEU) has released its judgment in the Bridport & West Dorset Golf Club case. This clarifies the scope of the exemption from VAT in respect of services provided by non-profit making bodies to individuals participating in sport. Historically the club had treated membership subscriptions as exempt supplies and 'green fees' charged to visiting players as subject to standard-rated VAT.

Back in 2009 the club put in a claim for incorrectly charged VAT, on the basis that such supplies should be covered by the EU exemption rules; this was refused by HMRC and following appeal hearings in the UK, the case was referred to the CJEU for a ruling.

The decision of the CJEU means that the granting of the right to participate in sport by a non-profit making body should be an exempt supply for VAT purposes regardless of whether the supplies are to members or non-members. This could potentially apply to a range of sporting clubs, not just golf clubs, established on a not-for-profit basis, that have previously charged VAT to non-members for the participation in sport.

What next?

The ruling means that all supplies by non-profit making bodies (for example membership clubs) linked to the participation in sport should be exempt and they should now review their current prices to ensure that VAT is not being charged incorrectly. Clubs should also consider submitting a claim to HMRC for over-declared VAT, if they have not already done so, for the past four years. This will, however, have an impact on input VAT previously recovered as this will now be attributable to an exempt supply without the ability to recover related input VAT.

Let's look at the bricks and mortar

The case of Leyton Sixth Form College v HMRC [2013] UKFTT 660 (TC), provides a useful summary of the approach the Tax Tribunal will adopt when considering whether construction services provided should be zero rated.

This case concerned the differences in interpretation of what was constructed and the liability of the supply of construction services to the college. The college claimed that what was constructed was an annexe and therefore the construction services were zero rated; HMRC argued that it was an enlargement or extension to an existing building rendering the construction services liable to the full standard rate. If the services were taxable at the standard rate approximately £500,000 of VAT would be due on those services.

In reaching the decision that the services were to create a standard rated enlargement of an existing building, the Tribunal adopted a very pragmatic approach to the questions posed, not only looking at the submissions of both parties but conducting a site visit to see for themselves what the finished building looked like.

Their conclusion was based on the fact that though the additional building had some features which indicated a degree of independence, these were far outweighed by the fact that the entire building was designed in its layout as a single and unified entity. The Tribunal also stated that if they were wrong on this point, zero rating could not be applied as the completed building failed the other statutory requirements of being capable of independent operation and the only or main access being separate from the existing building (the plant room was shared with the old building and the main access to both buildings was via the new building).

The point here is that the intentions of the parties at the time the building was constructed are irrelevant. The question as to whether a building is an annexe or enlargement to an existing building is a question of fact answered by reference to the layout, equipping and function of the building. This can only be answered after an objective comparison of the physical characteristics of the building before the works were started and when they were finished.

What next?

Those contemplating constructing an annexe should critically review as early as possible any 'before and after' drawings/computer-generated images to assess whether the completed building(s), if challenged, will be viewed as an annexe of or an enlargement to an existing building. This would then enable a decision to be made to amend the design, if practical, to ensure the construction qualifies for zero-rating.

HMRC news in brief


Businesses involved in buying goods from other VAT registered businesses in the EU will be interested in the new threshold for submitting Intrastat arrivals declarations.

The arrivals threshold for 2014 is increasing from £600,000 to £1,200,000; the dispatches threshold remains unchanged at £250,000.

Also from 1 January 2014, the threshold for providing delivery terms information on an Intrastat declaration (both arrivals and dispatches) is increasing from £16,000,000 to £24,000,000.

Fuel scale charges

HMRC has announced a couple of changes to the operation of the fuel scale charge rules for partly exempt businesses.

Until 31 December 2013, by concession, partly exempt businesses were able to reduce the amount of the fuel scale charge in line with their partial exemption VAT recovery rate.

However, from 1 January 2014, HMRC has withdrawn this concession and businesses must account for VAT on the full fuel scale charge. The reclaiming of VAT on road fuel will then be restricted according to the agreed partial exemption method.

Changes to the place of supply rules from 1 January 2015

As we move closer to 1 January 2015, the European Commission has produced draft guidance on the introduction of the VAT mini one-stop-shop (MOSS), the single online VAT accounting portal for supplies of broadcasting, telecommunications and e-services to private and non-business customers.

The aim of the guidance is to provide businesses with a better understanding of the operation and compliance requirements relating to the MOSS and has been published in advance of the 1 January 2015 implementation date to allow businesses to familiarise themselves and adapt to the new rules in time.

A copy of the draft MOSS guidance can be found at

Updated VAT recovery guidance for housing associations

In conjunction with the National Housing Federation, the Scottish Federation of Housing Associations and Community Housing Cymru, and with the knowledge of the Northern Ireland Federation of Housing Associations, HMRC has issued a second version of the Framework for Housing Association Partial Exemption Special Methods.

The framework document explains how certain activities will affect VAT recovery and how a special method might be structured to receive approval from HMRC. However this is not mandatory and does not consider all methods that a housing association might apply nor does it attempt to deal with some of the more difficult VAT areas for housing associations.

The framework document issued by HMRC runs to 42 pages and can be found at:

Partial exemption frameworks for higher education institutes and NHS bodies

In addition to the partial exemption framework for housing associations, HMRC has prepared two further partial exemption framework documents for higher education institutes and NHS bodies.

The frameworks have been prepared in conjunction with the British Universities Finance Directors' Group (BUFDG) and Health Finance Managers Association (HFMA), the representative bodies that are responsible for the tax affairs of higher education institutes and NHS bodies respectively.

As with housing associations, the use of the frameworks is not mandatory but HMRC says that by following the principles it will ease the process of HMRC agreeing proposed special methods for VAT recovery.

The frameworks are not designed to replace the existing partial exemption guidance in HMRC Public Notice 706: Partial exemption. Bodies wishing to use a special method must still seek written approval from HMRC.

Further information on the frameworks can be found at: and

What next?

If you are affected by any of the issues highlighted in this newsletter and would like to discuss them, please speak to a member of the VAT team or your usual Smith & Williamson contact for more information.

We have taken great care to ensure the accuracy of this newsletter. However, the newsletter is written in general terms and you are strongly recommended to seek specific advice before taking any action based on the information it contains. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. © Smith & Williamson Holdings Limited 2014. NTD171 exp: 31/08/2014

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